A record amount of housing wealth was unlocked by homeowners aged 55 and over in 2015, with £1.61bn withdrawn through specialist equity release plans.
Lending was up by 16% on the previous year’s figure, the Equity Release Council said, as homeowners used lifetime mortgages and reversion plans to access cash from their homes.
More than 22,500 deals were agreed for the year – the highest number since 2008 – and the value of borrowing now exceeds its pre-recession peak by a third.
Lifetime mortgages, which allow borrowers to take out a loan against a property and only pay the interest on its sale, were the most popular form of borrowing, while reversion plans, which allow homeowners to sell part of their home but continue to live there, accounted for less than 1% of deals agreed.
The figures highlight how for many retirees property is their biggest asset, and how rising house prices have allowed some to build up considerable equity. The ERC said customers borrowed an average of £70,670 each.
Nigel Waterson, chairman of the council, said the figures were “the latest sign of growing reliance on housing wealth as a key pillar of later-life financial planning”.
He added: “Housing wealth is often people’s greatest asset, and it makes sense for equity release to be on every homeowner’s checklist to consider as part of their retirement and estate planning. At the same time, it is not suitable for every circumstance, which is why professional financial advice and independent legal advice are essential.”
Simon Chalk, equity release expert at retirement advisers Age Partnership, said a 9.5% rise in house prices in 2015 had made peoples’ homes “potentially their greatest asset”.
“During the year, more over-55s benefitted from their increased housing wealth than before as annual equity release lending reached a new high.
“The strong growth in the market is set to continue into 2016 as house prices see no sign of slowing down and people become more aware of the importance of their housing wealth.”
Equity release plans were controversial in the past, with the original incarnation of products allowing homeowners to end up owing more than they released from their property.
Current plans have protection against negative equity, but are still not always the best option for homeowners as they offer less cash than would be available if the property was sold on the open market, and have other financial implications.
Alex Edmans, head of retirement at Saga, said: “These latest figures suggest people like being able to unlock cash from their home as and when they need it. This can be a smart move financially as people only have to pay interest on the funds they release, but they know they can unlock more cash at a later date if they need to.
“However, equity release is not right for everyone. We always recommend getting thorough advice before taking out a plan, as well as speaking to family and friends so they know what you are thinking of doing.”
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